Harvardian Colleges of San Fernand vs Country Bankers Insurance Corp.

CA-G.R. CV No. 03771

Facts.
Harvardian is a family corporation. Prior to April 1979, an agent of Country Bankers proposed to
Harvardian to insure its school building. Although at first reluctant, Harvardian agreed. Country Banks
sent an inspector to inspect the school building and agreed to insure the same for P500,000 for which
Harvardian paid an annual premium of P2,500. On August 9, 1979, Country Bankers issued to Harvardian
a fire insurance policy. On March 12, 1980, during the effectivity of said insurance policy, the insured
property was totally burned rendering it a total loss. A claim was made by plaintiff upon defendant but
defendant denied it contending that plaintiff had no insurable interest over the building constructed on the
piece of land in the name of the late Ildefonso Yap as owner. It was contended that both the lot and the
building were owned by Ildefonso Yap and not by Harvardian Colleges.

Issue. Whether Harvardian Colleges has a right to the proceeds.

Ruling. Yes.

Harvardian has a right to the proceeds. Regardless of the nature of the title of the insured or even if he did
not have title to the property insured, the contract of fire insurance should still be upheld if his interest in
or his relation to the property is such that he will be benefited in its continued existence or suffer a direct
pecuniary loss from its destruction or injury. The test in determining insurable interest in property is
whether one will derive pecuniary benefit or advantage from its preservation, or will suffer pecuniary loss
or damage from its destruction, termination or injury by the happening of the event insured against.

Here Harvardian was not only in possession of the building but was in fact using the same for several
years with the knowledge and consent of Ildefonso Yap. It is reasonably fair to assume that had the
building not been burned, Harvardian would have been allowed the continued use of the same as the site
of its operation as an educational institution. Harvardian therefore would have been directly benefited by
the preservation of the property, and certainly suffered a pecuniary loss by its being burned.